How Distortions Alter the Impacts of International Trade in Developing Countries

Substantial research in development economics has highlighted the presence of weak institutions, market failures and distortions in developing countries. Yet, much of the knowledge generated in international trade comes from workhorse models that abstract from these frictions. This review summarizes the recent literature that assesses how these characteristics interact (or may interact) with trade reforms, resulting in different impacts in developing countries relative to what we would expect in developed countries. We discuss understudied areas that warrant further research.Institutional subscribers to the NBER working paper series, and residents of developing countries may download this paper without additional charge at "http://www.nber.org/papers/w26230"